Welcome to Yield & Reason. We hope you had a peaceful Easter.
Five weeks in, the US-Israeli conflict with Iran continues to dominate the headlines — and the markets. Brent crude is trading around $109 per barrel — up roughly 36% since hostilities began on February 28 — and the ripple effects are now showing up in everyday life: fuel, airfares, heating bills. The central question facing every major central bank is the same uncomfortable one: raise rates to fight the inflation shock and risk pushing economies into recession, or hold steady and let energy-driven price pressures become entrenched. There is no easy answer. Bond markets are selling off — the opposite of what you would normally expect in a crisis — signalling that investors are treating this as an inflationary shock, not a growth scare. Equities sit in an uneasy middle ground. EPS estimates have actually risen this month, but Q1 earnings season kicks off next week and will be the first real test of whether that momentum can survive the energy shock. Two clocks are running simultaneously: the oil price and the peace talks. This week, for the first time, Iran signalled a conditional willingness to negotiate. Markets rallied sharply. But whether the conditions for a real deal exist is another question entirely — and that is where we start.
Chart of the Week
Brent crude: what markets are actually betting on
The futures curve slopes from $109 today to $79 by December — a $30 drop baked in. Markets are collectively betting the Hormuz disruption is temporary and prices normalise. If they are wrong, every long-duration asset is mispriced.
Yes, Brent is trading at $109 — up 36% since February 28. But look at where the futures market prices oil in December: around $79. That steep downward slope is called contango, and it is the most important signal in energy markets right now. It means traders collectively believe this crisis will resolve, oil will fall, and prices will normalise. The shaded zone between the futures curve and the pre-war price of $73 is the war premium — roughly $30–36 per barrel of pure geopolitical risk. Strip that out and the market's view of oil fundamentals is not far from where we started. The critical question for every asset class is simple: what if the market is wrong?
Causal Chain
Hormuz closes — where it leads
Oil does not move in isolation. Every spike ripples through the entire financial system in a predictable sequence. Tap each node to follow the chain.
Asset Roundup
What moved & why
Q1 is in the books and it wasn't pretty. The S&P 500 closed the quarter down 4.6% — its worst three months since 2022. What's interesting though is that earnings haven't collapsed. More companies are guiding positively than negatively for Q1. The problem isn't profits — it's confidence. Investors are paying less for every dollar of those earnings, with the forward P/E falling from 22x at year-end to 19.8x now. That gap between "companies are still making money" and "but we don't trust the future" is exactly where markets sit right now. The answer comes this week — Q1 earnings season kicks off and if energy costs start showing up in guidance, that fragile confidence cracks further.
Closer to home, the SMI has held up better than most European indices. Nestlé, Roche, Novartis — when the world gets nervous, defensive stocks are where people hide. Novartis reports April 28. Watch it.
The 30-year Treasury is knocking on the door of 5%. That number matters because it's a psychological line that tends to force institutional investors to rethink allocations. The 10Y closed at 4.31% and the 2Y at 3.79% — the curve is positive but the direction of travel on the long end is telling you something: this is being treated as an inflation shock, not a growth scare. Bonds should be a safe haven right now. They are not. Powell this week gave markets a "wait and see" — no cut, no hike, hands on the wheel but foot off the pedal. The April 28–29 FOMC is the next moment of truth.
Brent at $109. Gold at $4,703 — which is actually 16% below its January all-time high of $5,595. That gold story is worth a pause. It spiked when the conflict began, then got sold. In really extreme volatility, even safe havens get liquidated — investors sell what they can to cover losses elsewhere. It happened in 2008, it happened in March 2020, it's happening now. The structural case for gold hasn't changed. Central banks bought over 1,100 tonnes last year. At $4,700 it looks more interesting than it did at $5,500.
Swiss CPI came in at 0.3% year-on-year for March — confirmed by the Federal Statistical Office — driven by heating oil, airfares and petrol. Put that next to the Eurozone at 2.5% and the UK heading toward 3.5% and Switzerland looks like a different planet. But low inflation isn't the same as no problem. Energy costs feed through with a lag — utility bills and business inputs haven't fully adjusted yet. Add in Swiss public transport fares rising 3.9% in December, partly because Parliament abolished mineral oil tax reimbursements from 2027, and you can see domestic cost pressures quietly building. The SNB meets in June. With inflation at 0.3% and the franc already strengthening as a safe haven, rates stay at zero. The only real question is whether the SNB steps into FX markets to stop the franc getting too strong — and at what level they blink.
Yield & Reason's Take
The market is running two stories at once
Five weeks in and markets are essentially running two parallel narratives simultaneously — and only one of them can be right.
The oil futures curve says this ends soon. The bond market says inflation is here to stay. Equities are caught in the middle, unable to commit either way. Something has to give — and Q1 earnings season starting this week may be the moment that forces the reckoning.
The historical parallel worth sitting with is 1973. When Arab nations launched the Yom Kippur War and the oil embargo followed, US equities actually rose 2.3% in the weeks after hostilities began. The market kept telling itself it was temporary. It peaked one day after the ceasefire was announced — then fell 40% over the following year. Markets were not wrong about the ceasefire. They were wrong about what came after it.
Iran's president signalled a conditional willingness to negotiate this week. Markets rallied sharply on the news — over 3% in a single session. We think that rally deserves some scepticism. Iran's conditions — which almost certainly include maintaining some form of leverage over Hormuz — are unlikely to be accepted by the US-Israel axis without significant concessions. The Pakistan-hosted talks next week are worth watching, but the structural gap between what each side needs to save face is still very wide. A relief rally on hope is not the same as a resolution.
Here is how we see the probabilities:
Trump wants out politically, Iran wants sanctions relief and regime survival guarantees. A deal exists in theory. If it happens, oil falls rapidly toward $75–80, equities stage a sharp recovery and the SNB breathes easier as CHF safe-haven demand fades. Buy cyclicals, sell gold.
The Hormuz toll system becomes a semi-permanent feature — Iran extracts leverage, some ships pay, others reroute via the Cape of Good Hope. Oil stays in the $90–110 range, stagflation becomes the base case, and the 1973 catharsis for equities still lies ahead. Short-duration bonds, gold and defensives — Nestlé, Novartis, Roche — are where you want to be.
Either US military action to force Hormuz open, or Iranian strikes on Saudi or UAE infrastructure. Brent tests $130+. Global recession risk becomes the dominant narrative. Cash, gold and energy producers. We acknowledge 20% feels uncomfortable, but tail risks in energy markets have a habit of being underpriced.
The SNB is sitting on the most constrained monetary policy of any major central bank. Rates at zero, inflation at 0.3%, a strengthening franc — and no conventional tools left. If the CHF appreciates too aggressively, Swiss exporters get squeezed and the SNB steps into FX markets. But intervening to weaken your currency while your neighbours are fighting inflation is a delicate line to walk. Watch EUR/CHF closely — if it breaks below 0.92 the SNB will act. That's the local signal that global stress has crossed a threshold.
The most important question for next week is not whether Iran talks happen. It is what companies say about their Q1 costs when earnings season begins. That is where the macro story becomes a corporate reality — and where markets will have to stop sitting on the fence.
One Concept, Simply Explained
Contango
When you see an oil price quoted on the news, you're seeing the spot price — what someone pays to buy a barrel today. But there's a whole other market running in parallel: futures contracts, where buyers and sellers agree today on a price for oil delivered months from now.
When those future prices are lower than today's spot price, the market is in contango. The market is saying "yes, oil is expensive right now, but we think it'll be cheaper later."
That's exactly where we are today. Brent is at $109 now but the December futures contract prices oil at $79. A $30 gap. That's the market collectively betting that the Hormuz disruption resolves, supply returns, and prices normalise by year end.
Here's why it matters beyond oil. If the futures market is right, inflation pressures ease, central banks don't need to hike, bonds recover, and equities find their footing. The whole macro narrative improves. But if the market is wrong — if the disruption is more structural than temporary — then that $30 gap has to close upward, not downward. Oil stays high, inflation stays sticky, and every asset class priced on the assumption of resolution has to reprice. That's the risk hiding in plain sight inside a chart that looks, on the surface, like good news.
Data Snack
For the first time in Swiss history, there are more people aged 65 and over than under 20. Switzerland's population hit 9.1 million in 2025 — and it is getting older faster than it is growing. Worth watching for Roche, Novartis and Swiss pension funds. Deep dive coming.
Quick Quiz
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